In a world that lives by quarterly profit reports, many companies take a carpe diem approach to their business model: seize the day and maximize short-term profits. The goal is to get a tangible return on investment while also incentivizing shareholders to invest.
While common, this way of doing business requires a narrow view of what it means to run a successful and sustainable organization. Looking at today's profits through this lens might make it look like things are running smoothly, but it misses the way some risks have been socialized and aren't reflected in the balance sheet.
The classic business equation Total Assets = Total Liabilities – Shareholders Equity is mathematically sound, of course. But it fails to take into account the larger context of the organization and the production of its goods and services – production that may have real costs to the environment.
Sustainability reporting is meant to capture and document important information that is left out of typical financial reports. And while it may not focus on the cold, hard cash generated by business activities, it can nevertheless guide the company to greater success and a longer future.
The Value of Sustainability Reporting
In 1990, Peter Senge stressed the importance of taking a more holistic look at the way we run our organizations. Writing in The Fifth Discipline:
“From an early age, we are taught to break apart problems, to fragment the world. This apparently makes complex tasks and subjects more manageable, but we pay a hidden, enormous price. We can no longer see the consequences of our actions; we lose the intrinsic sense of connection to a larger whole.”
Much earlier, some 150 years ago, Henry David Thoreau hit on a similar insight about sustainability, asking “What is the use of a house if you don’t have a tolerable planet to put it on?”
Now these ideas are finally coming of age. Investors and stakeholders are beginning to look at sustainability not only as a matter of self-interest and self-preservation, but also as a competitive advantage. After all, sustainability not only contributes to a healthier planet, but a better business environment as well.
The sustainability report (or sustainability disclosure) is intended to provide a picture of the organization’s environmental, social, and governance (ESG) performance and demonstrate how the it is going above and beyond the generally accepted business practices to ensure its activities have an overall positive impact on its employees, stakeholders, the environment, and the world at large.
Producing your first sustainability report takes a fair amount of effort. It involves a good deal of background work, steps must be taken to ensure complete transparency, and it must engage stakeholders while also integrating with the overall business strategy.
But that's only the beginning, and many organizations aren't sure where to go from there. So, let's take the time to answer that question now. Once you've produced your first sustainability report, what should be your next steps?
(Find out Why EHS Is Vital to Your ESG Program)
Where Do You Go From Here?
Your first sustainability report is only the beginning. It serves as the cornerstone for future sustainable practices, sets the tone for subsequent developments, and demonstrates a commitment to pro-social business practices.
It is not the end of the journey, but the start of a cycle. And the very first part of that cycle will be the publication of the report you compiled.
Publish the Report
After compiling the report, make sure it's available to internal and external stakeholders.
Depending on who those stakeholders are, you can make the report available in a number of ways, including:
No matter how or where it is shared, it's a good idea to make sure the report is made available in multiple languages and in formats that are accessible to readers with disabilities.
Also be sure to track the metrics on the report to see how many of your stakeholders engage with it.
The publication of your report is critical to helping your organization gather support and financing. While the other stages will be less public, they are equally important and allow you to get the most value out of your reporting efforts.
Demonstrate Support for Sustainability
Like any other corporate initiative, sustainability efforts need visible support from leadership. Without clear and explicit backing from those at the top of the organization, sustainability efforts are perceived as mere formalities and quickly lose steam.
Sustainability initiatives will also be more effective and powerful when they are integrated into the organizational culture. After all, a company culture that is conducive to sustainability can accomplish far more than a few key players pushing for better business practices.
All the other recommendations below really hinge on this kind of backing and support. Without genuine commitment from leadership and a workforce that sees sustainability as an important aspect of what it does (and not an activity that is delegated to a separate department), sustainability cannot be held as a real organizational value.
If there is still too much resistance or too little buy-in for sustainability, your focus should be to advocate for it and win over people at all levels of the company.
(Find out how to Get Your CEO to Support Safety with the Curve Approach)
Employee Engagement
Sustainability is not something that can be declared by fiat. It is a matter of day-to-day operations, meaning it is fundamentally about the people in your organization and the values they bring to their work.
This means that sustainability cannot be achieved without employee engagement. And securing that engagement is primarily a matter of three things: involvement, clarity, and education.
Involving employees in your sustainability activities and the decision-making process behind them gives them ownership over these initiatives. It also makes it clear that this is something they can actively participate in, not a set of rules imposed from the top.
Clarity is all about how these efforts are communicated to workers. To buy into these initiatives and help you achieve your sustainability goals, the employees have to actually know what those goals are and understand how you plan to meet them. Speaking to them in vaguely defined terms and not providing them with actionable ideas will not create engagement. Instead, it will lead to indecision and indifference.
Finally, it's important to provide the time, money, and resources to educate the workforce so they understand the value of sustainability, the purpose of the initiatives, and how they can contribute to making them a success.
Creating this kind of engagement will ensure that your sustainability report will have maximum impact – and that the next one you release will show signs of an organization striving for continuous improvement.
Conduct an Internal Review and Gather Feedback
The first sustainability report, like the other reports that will follow, should be seen as a tool for continuous improvement. The intent of the report isn't to simply state facts or to give corporate leaders a reason to pat themselves on the back; it's a roadmap for the future of your ESG program.
Conducting a review of the report will allow you to assess your current strengths and weaknesses, as well as identify the areas of improvement that should be tackled next.
Comparing the report with the expectations the leadership team had for it will also create a feedback loop that will be instrumental for the continuation of your current sustainability initiatives and the development of new ones.
Conduct an External Review
You should also go through the same process, albeit separately, with external stakeholders. This will allow you to assess how the report has been received and whether your organization's efforts need to be calibrated in light of feedback from external parties.
While it's easy to say, from an ethical perspective, that no price is too high when it comes to sustainability, the business case also matters. After all, the organization won't be able to continue its operations, let alone its sustainable practices, if the quarterly profits are threatened and investors lose confidence.
Getting feedback from regulators and industry associations is also advisable. They will help you stay informed about changing regulations and compliance requirement related to sustainability and ESG more broadly. This will ensure that you're not only following every current requirement but also taking additional steps now so you're not caught off-guard by upcoming regulatory updates.
Update Your Goals
Based on the findings of the report and the feedback you receive, set new goals for your next reporting period.
To ensure that these goals get tangible results, make sure that they are SMART goals: specific, measurable, achievable, relevant, and time-bound.
The goals should be supported by an execution plan aimed at improving your sustainability performance. This can include, among other things, updating your policies, procedures, and practices to meet your goals more effectively.
(Find out How to Track Your ESG Performance)
Acquire Certifications and Standards
Obtaining certifications and standards is a way to communicate your commitment to sustainability.
If the results of your report show that you already meet the requirements to earn these types of recognition, or that you are likely to achieve them with future efforts, then you should consider following the procedures to get these.
As sustainability increasingly becomes a competitive advantage, securing these proofs of your achievements will enhance your organization's credibility and marketability.
Assess Your Supply Chain
In his Sustainability Strategies course, David Bennell notes that "even for companies manufacturing non-energy using products, close to 70% of their environmental footprint can be in the supply chain.”
Your supply chain impacts your sustainability in two major ways:
- The longer the supply chain, the more negative of an environmental impact it is likely to have
- The sustainability of your organization is directly linked to the sustainability of each link in the supply chain
While your supply chain involves numerous parties outside of your organization, there are ways you can create a more sustainable supply chain for your operations. Most obviously, by changing suppliers and opting for one whose practices line up with your corporate values.
A more practical and less disruptive approach is to work with your current suppliers by encouraging them to improve their environmental and social practices. You can also offer support, resources, and advice based on your own successful practices to fast-track their path to sustainability. This takes more time than simply switching suppliers, but it can have a much greater impact, with positive ripple effects that extend beyond your organization.
Evaluate the Need for Tech Solutions
Recent years have seen major developments in green technologies and software that can track ESG performance with a good deal of precision. Your sustainability report is an opportunity to consider what kind of technology you could adopt to overcome challenges identified in the report and optimize your performance.
While there are costs associated with updating your current tech or adding to the array of software your rely on to keep your business running smoothly, the results can often be impressive. Using the right tech can substantially reduce your environmental footprint and help your organization do more good overall. And the data and insights gathered in your sustainability report can help you make a highly informed decision, ensuring that your next investment in tech will bring benefits worthy of the investment.
Get the Most Out of Your Report
Issuing the first sustainability report is a major milestone for any organization. It's not simply a document circulated among company insiders; rather, it signifies a change in direction. It demonstrates a move away from profit as the only measure of performance and toward a place where the two other P's (people and the planet) also drive operations.
Sustainability, however, is an ongoing journey. To remain sustainable, organizations need to continue putting in effort, looking for areas of improvement, and trying various approaches until they find the one that fits. It also requires taking a broader purview by continuously engaging with stakeholders, keeping pace with legal and technological developments, and striving to raise expectations across the supply chain.
Every organization should produce its own sustainability report, but only those that act on their findings will show real leadership and push business forward.